Types of Divergences in Technical Analysis Divergence Strategy” is a strategy that can be utilized to generate accurate buy & sell signals. Mainly there are two types of divergence:
Regular divergence. Hidden divergence.
Regular Divergence Regular divergence occurs when the price action makes higher-highs or lower-lows. Regular divergence can be either bullish or bearish.
Bullish Divergence and Bearish Divergence The bullish divergence happens in a down-trend when the price action prints lower-lows that are not confirmed by the oscillating indicator. Bearish divergence occurs in an up-trend when the price action makes higher-highs that are not confirmed by the oscillating indicator.
Hidden Divergence Hidden divergence occurs when the oscillator makes a higher-high of lower-low while the price action doesn’t. It indicates that there is still strength in the current trend which will resume.
Bullish Divergence and Bearish Divergence Bullish Hidden Divergence happens during a correction in the uptrend when the oscillator takes a higher-high while the price action doesn’t. Bearish Hidden Divergence happens during a reaction in a down-trend when the oscillator makes a lower low while the price action doesn’t.